These are called credit cards or personal lines of credit. They are very useful for purchasing without using cash or checks or other forms of easy to steal money. Having too many of these can be bad for your credit score and cause your accounts to be out of balance with the number of revolving accounts you might have. A good thing to remember is that you need to have a at least one bank revolving account with a national bank, not just a local bank or credit union. It will impact your credit score.

When you have high ratios on multiple loans it will affect the overall debt to credit limit ratios. What this means is that the credit bureaus not only checks the debt to credit limit ratio on each account you have but also on all accounts overall, jointly. They add up all the balances together and all the credit limits together and takes the ratio of these. If the ratio is high, it shows you are a high-risk consumer and down come your credit scores. It is important to keep all your ratios as low as possible to increase your credit scores.

Reduce Installment loan balances below 80%

Just as you would reduce your balances on revolving credit to 45% or less to increase your credit score, you would also reduce your installment loan balances to 80% or less to increase your scores also. Credit bureaus know that it is harder to get an installment loan and they are usually bigger loans. They also know they are fixed payments for a fixed amount of time. All this adds up to being more lenient on the balance portion, but above 80% is still too much debt and doesn’t show much payment history for them to decide that you are a low risk. But as soon as you get the debt below 80% of the original balance, your scores will start going higher and higher because of this one factor.

Reduce credit card balances to 45% debt to credit limit ratio.

We often find that because of emergencies we have run up our credit cards guaranteed and are close to maxing them out. This is very costly to a credit score because it shows the credit bureau scoring modules that we are in need of credit more than not. We are then “high risk” and our scores will drop significantly. . (Remember that debt to credit limit ratio is how much debt you have to how much credit you have available. Staying below 45% will increase your credit score while going over will cost you points.) There are several limits that you need to be aware of that will cost you more points or give you more points when you cross over them. Under 14% used credit is the same as a zero balance, except for 1 crucial point. If you have even $1 on an account, that is an “account with a balance” and will figure into #9 below and the overall number of accounts with balances. If these are out of balance, then it could cost you points.